Australia’s 2026 federal budget’s long-term impact will be in the details

The immediate fuel and cost-of-living crises were front and centre in Australia’s 2026 budget.

Here, we dive into what the budget means for Climateworks Centre’s priorities to mainstream net zero policy and practice across the economy.

Movement towards a resilient, prosperous economy 

The budget included a range of measures in response to the short-term impacts of the fuel crisis. 

What matters more is how to keep momentum in the shift to electrification to make best use of Australia’s clean energy resources. 

Shifting to renewable electricity and electrifying transport and industry is crucial for a resilient and prosperous Australia. 

The budget includes investment in behind-the-scenes changes to systems to improve planning and coordination across layers of governments. 

By modernising integrated electricity system planning and improving the use of demand-side resources such as household batteries and solar, these changes aim to benefit households and meet Australia’s future energy needs. 

There are also changes designed to speed up renewable energy deployment.

Other new announcements include measures to reduce diesel use in freight, industry and remote communities, which bring dual benefits for cost-of-living and reducing reliance on fossil fuels.

While the new commitments were relatively small, major funding commitments already in place include over $30 billion of concessional loans from the Clean Energy Finance Corporation and the $15 billion National Reconstruction Fund to catalyse private investment into renewable energy, in order to improve energy performance and create new green industries.

Still to be seen is the impact of changes to tax and superannuation, particularly for renewable energy projects. 

Once again, the detail matters – some of which is under consultation. 

Modernising heavy industry

The government has committed substantial funds to transform Australian industry, turning renewable advantage into industrial capability. 

With the funding largely in place, the priority moves to coordinating and accelerating delivery of projects on the ground.

Climateworks therefore welcomes moves to strengthen the Investor Front Door as part of the Future Made in Australia agenda, helping nationally significant projects navigate approvals, coordinate support across governments, and connect with relevant public investment mechanisms.

The budget signals support for domestic capability in the production and processing of resources and stronger supply chains, including critical minerals. With interventions like these, the detail will matter, and it will be important to pair short-term support with credible long-term transition pathways for Australia’s metals industries. 

Investments include up to $1 billon for the transition of the Boyne Island aluminium smelter to renewable energy, further operational funding for Whyalla Steelworks, and support for Liberty Bell Bay manganese smelter workers

Australia’s competitiveness will increasingly depend on accessing low-emissions energy, investing in modern production pathways, creating stronger demand signals for cleaner materials, and positioning the nation to benefit from emerging premium green materials markets.

Prioritising alternative ways of moving people and goods

New budget announcements for efficient clean transport included a set of small but important initiatives to electrify freight and encourage mode shift, building on recent announcements by ARENA and CEFC.

The Active Transport Fund has been locked in for longer, with $500 million to be committed over ten years. 

This helps more Australians hop on their bike or walk, helping them to save on transport costs while reducing one of Australia’s largest sources of emissions.

The budget allocated $40.5 million to electrify Australia Post’s delivery fleet and $55 million for a Transport Resilience and Capacity Kickstart pilot to get more freight moving by rail and ship – addressing one of the most emissions-intensive sectors in Australia. 

The National Competition Policy will also be used to ramp up heavy vehicle reforms to increase productivity and grow the uptake of zero-emissions heavy vehicles.

Additional measures, beyond what is in the budget, could catalyse freight decarbonisation.

Such measures include providing incentives for businesses to purchase zero-emissions trucks, removing regulatory barriers to getting these trucks on Australian roads and providing a baseline freight charging network.

ARENA’s $25.3 million for NewVolt’s shared truck charging hubs and the CEFC’s $70 million partnership with Volvo, which provides discounted finance for trucking businesses, show what targeted investment can unlock.

New builds, quicker approvals and electrification incentives for homes

On housing, the big pre-budget question was tackling inequity. 

This budget includes tax reform on capital gains, negative gearing and certain types of trusts – although new builds are exempt from the changes. 

These are paired with new investments through a $2 billion Local Infrastructure Fund for ‘last mile’ services to new housing developments – i.e. essential enabling infrastructure – and $100 million from the Housing Australia Future Fund. 

A lasting question is how the budget will improve energy performance of homes to make sure they are comfortable, healthy and cheaper to live in.

For new homes, any update to the National Construction Code on residential buildings had been delayed to 2029. 

Existing homes will continue to need attention. 

From a climate and household’s perspective, investment in existing homes is exactly where investment can have the greatest impact – upgrading homes is one of the fastest ways to cut household energy use and emissions at scale.

One continuing investment is more than $7 billion to subsidise home batteries. 

This is both hugely popular and already reducing the cost-of-living for those who have one – but also positive for the wider system, as batteries displace the use of expensive gas for electricity generation in the evening peak.

This budget states the federal government’s intent that the National Construction Code becomes simpler to use and encourages modern construction methods. 

How this ensures Australians can access high-quality homes will be in the detail. 

There is some movement on equivalent work to improve existing homes, through ratings and disclosures, though there were no announced changes in this budget.

Changes to environmental planning 

New spending on environmental planning has followed reforms to the Environment, Protection and Biodiversity Conservation Act late in 2025. 

The budget includes over $500 million to ‘accelerate and streamline’ environmental approvals, especially in priority categories, establish the National Environmental Protection Agency and implement bioregional planning promised in the reforms. 

Funding in this area includes money to modernise data and information systems and nearly $50 million to progress the bilateral agreements with the states and territories. 

There is further funding for the government to continue the Nature Repair Market and develop new project methods for the market. 

The intent is to increase investment in projects to restore nature, which could include the provision of environmental offsets.

This is another area of the budget where the detail will matter. 

Climateworks is a strong proponent of integrated system planning for land use – an approach that could deliver multiple benefits and balance competing pressures to support a resilient, thriving economy and environment.

Where to from here

Addressing the immediate pressures facing Australians was front and centre in this year’s budget. 

In the longer term, policy action will be critical to send strong signals of the nation’s commitment to a clean energy future, accelerating the shift through private investment and building Australia’s position in the global market.